StorageVET Applications and Demonstration Energy Storage Valuation Workshop

StorageVET Applications and Demonstration Energy Storage Valuation Workshop Ben Kaun, Program Manager Giovanni Damato, Senior Project Manager CPUC/CEC Joint Workshop November 2, 2017 10:00AM

Today s Workshop Objectives 1. Explain StorageVET capabilities and methodology 2. Provide concrete illustrations of StorageVET to evaluate energy storage project cost-effectiveness 3. Provide access and engagement instructions 4. Answer audience StorageVET questions and dive deeper into issues of interest 2

Agenda CEC Greeting - Mike Gravely, Energy Commission Meeting Objectives and EPRI Introduction - Ben Kaun, EPRI StorageVET Introduction - Giovanni Damato, EPRI Use Case Analyses with StorageVET - Miles Evans, EPRI and Ram Ravikumar, EPRI User Engagement - Giovanni Damato, EPRI and Udi Helman, Helman Analytics Lunch User Q&A and Advanced Training - Giovanni Damato, EPRI 10:00-10:05am 10:05-10:15am 10:15-10:30am 10:30-12:15pm 12:15-12:30pm 12:30-1:30pm 1:30-3:00pm 3

StorageVET Use Cases Sneak Peak 4

Energy Storage Use Cases Focus for Today s Workshop Distribution: Substation Upgrade Deferral Commercial & Industrial (C&I) Storage Generation: Peaker Substitution 5

StorageVET Use Case Demos Focus on Value Stacking Peaker Substitution Gas Peaker Substitution Energy Storage vs Conventional Capacity Resources Capacity, frequency regulation, spinning reserves and energy time shift C&I Storage Customer-sited Commercial & Industrial (C&I) Storage SGIP Incentive Sensitive to TOU rate structure, demand charges and load profile T&D Deferral Distribution feeder with thermal violations due to load growth Substation deferral with market services with 20 years horizon 6

EPRI Energy Storage Program Overview 7

EPRI s Public Benefit Mission Advancing safe, reliable, affordable and environmentally responsible electricity for society through global collaboration, thought leadership and science & technology innovation 8

EPRI Energy Storage Program Objectives: Support Energy Storage Transition from R&D to Operations PERFORMANCE AND RELIABILITY DATA Getting the Data Specify relevant data to safety, reliability, value Consistent comparison Performance/reliability track record MODELING Analyzing the Options Identify and screen opportunities Feasible and optimal location Design for optimal lifecycle value OPERATIONAL EXPERIENCE Putting into Practice Guidelines for deployment Customized tools Technical training 9

More than Batteries: Facilitating Grid-Ready Energy Storage Systems Storage Technology Explore technology tradeoffs Optimize technology for utility applications Project Deployment Establish best practices for siting and permitting Standardize grid connection Communication and control Power Electronics Guide common functions and control algorithms Ensure efficient and reliable operation Integrated Product Ensure safety and reliability Understand cost and performance Simplify procurement and operation through standardization of specification and interfaces Communications and Control Developing operational and dispatch algorithms Updated communications and grid controllers to accommodate storage functions and services 10

Collaboratively Building Reference Tools through the Energy Storage Integration Council (ESIC) Started in 2013, >1000 participants from utilities, suppliers and research community Identify Gaps Publish / collect experiences Define Work Needed Seven (7) published products at ESIC website: www.epri.com/esic Industry review Develop products together 11

StorageVET Introduction 12

Challenges to Modeling Storage Storage and limited energy resources are still not common Rules and regulations still are evolving Benefit stacking is appealing, but will it be possible More services = more value More services = more requirements Can they be satisfied? Locational value of storage requires sitespecific analysis Complex optimization between storage degradation and service participation scheduling 13

Storage Made Easy: StorageVET Paving the Way 2020 Goal: Make StorageVET Live in 2016 Integrated Value + Impact Energy Storage Modeling in 2017 StorageVET Expanded Footprint and Validation Storage 2013 CPUC Cost Effectiveness Study using EPRI s ESVT 14

StorageVET Storage Value Estimation Tool: www.storagevet.com Web-hosted tool, free to the public Project cost-benefit analysis Time-series constraints and dispatch optimization simulation Multi-services optimization and stacked services Customizable for location, technology, sizing, use cases Made possible through funding support from the California Energy Commission (CEC) StorageVET Goals Accessible Transparent Validated Customizable 15

Users of StorageVET Today Key Use Cases Common Communication Platform Locating & Screening Common Benchmarking Tool Screening, Design, Procurement, & Operations Regulators Utilities Sizing/Designing (stacked services) Operational Strategies (Customer and Grid) Bill Savings Assessment Product Selection Customers Developers Sales, Marketing, RFP Response 16

StorageVET In Action: California Examples Multiple-Use Applications (MUA) Self-Generation Incentive Program (SGIP) Distributed Energy Resource (DER) Hosting Capacity DER and Microgrid Valuation Renewable Portfolio Standard (RPS) 17

Use Case Analyses with StorageVET Miles Evans, EPRI Ram Ravikumar, EPRI Use Cases Are Illustrative Only, Do Not Cite 18

Customer Storage How does a customer economically justify storage?

Commercial & Industrial (C&I) Storage 20

Customer-sited Services 21

Customer Storage - Introduction Customer-sited energy storage for demand charge reduction Not performing energy time shift Reserve SOC because load uncertain There are soft reasons for customer-sited ES, including corporate goals or maintaining a green image. 22

Customer Storage Benefits Incentives - SGIP Additional 20% if equipment comes from approved CA manufacturer 23

Customer Storage Design and Costs Large Office in San Diego examines a customer-sited ESS for demand charge reduction ESS can also shift load from peak hours to off-peak Design: Power Capacity: 250 kw Energy Capacity: 500 kwh (2 hrs at rated power) Cost Total Installed Cost: $400,000 ($800/kWh*, $400/kWh replacements) This ESS is servicing a large office load** *Greentech Media Research s Q2 2017 Energy Storage Monitor Report low end **OpenEI San Diego Large Office 24

Assumptions ESS round-trip efficiency = 85% No Auxiliary Power or Self-discharge No O&M Costs ES not net-metered SDG&E AL-TOU Secondary (>500kW) rates Static over time No Demand Response participation or backup power 25

Demand Charges Two additive monthly demand charges Facility demand charge (all times) $24.51/kW On-peak demand charge $21.13/kW summer $7.57/kW winter Flat fee of $465.74/mo Only $116.44/mo if load <500kW Edge case for energy storage here 26

Energy Charges SDG&E AL-TOU Secondary (>500kW) rates Summer P Peak P Offpeak = 4.059 /kwh Winter P Peak P offpeak = 3.697 /kwh These are enough to overcome efficiency losses but maybe not degradation losses /kwh Winter Summer Hour of Day Weekday Weekend Weekday Weekend 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 7.322 9.464 11.019 9.464 7.322 8.148 11.233 12.207 11.233 7.322 8.148 8.148 27

Load Power (kw) Operational Results StorageVET 1600 1400 1200 1000 800 600 400 200 0 Yearly Peak on Oct 6 0 2000 4000 6000 8000 Time (hrs) 28

Load Power (kw) Operational Results StorageVET 1600 Image of peak day load profile Original before Peak Load and after 1400 1200 1000 800 600 400 200 0 Modified Peak Load This month, the battery saved $4615 in demand charges 0 20 40 60 80 Time (hrs) 29

Thousands 30 Financial Results $800 $700 $600 $500 $400 $300 $200 $100 $0 Capital Cost, $455 Net Taxes, $60 Cost SGIP, $220 Energy Time Shift, $25 Demand Charge Reduction, $506 Benefit Illustrative Do not cite

Financial Results ESS shifted enough load from peak hours to off-peak hours to reduce energy charges by $26,880 over 10 years Dispatch not optimized against cycling degradation cost SOC not bounded Break-even cost of storage: $1,383/kWh 31

Thousands Financial Results 20% SOC Reservation No Energy Time Shift $800 $700 $600 $500 $400 $300 $200 $100 $0 Capital Cost, $455 Net Taxes, Cost $18 Illustrative Do not cite SGIP, $220 Demand Charge Reduction, $457 Benefit 32

AC Power (kw) PV + Storage in StorageVET 1400 Storage $1,200,000 1200 1000 800 600 Net Load PV $1,000,000 $800,000 $600,000 SGIP Energy Time Shift 400 200 $400,000 $200,000 Initial Capital Cost Principal Interest Demand Charge Reduction 0 2017-08-01 0:00 2017-08-02 0:00-200 $0 Net Tax Cost Benefit -400 33

Substation Upgrade Deferral Does the benefit of deferring an upgrade outweigh the cost of energy storage?

Distribution Storage 35

Substation Upgrade Deferral Feeder thermal violations due to load growth Only a few hours a year Either upgrade the substation or install storage to discharge during peak hours and defer upgrade. Load will continue to grow and necessitate upgrades in the future Storage can provide other services, including frequency regulation, spinning reserve, energy time shift, and resource adequacy Analysis horizon = 20 years for all cases 36

Power (MW) Substation Upgrade Deferral 16 14 12 10 8 6 4 2 2022 Feeder Load Thermal Limit 0 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 Hour of Year 37

Substation Upgrade Deferral Cost-Benefit Costs ESS Installed Cost (2MW, 2hr) = $3,200,000 ($1,600/kW)* ESS Installed Cost (2MW, 4hr) = $4,600,000 ($2,300/kW)* Fixed Operating Cost = $19.5/kW-yr Primary Benefit: Substation XFMR Upgrade Deferral 14 MVA to 28 MVA upgrade Upgrade cost = $5.5M** Carrying cost (12%/yr***) = $660,000/yr Secondary Benefits Southern CA 2015 frequency regulation prices SCE DLAP 2015 energy prices Spinning reserve offered when available 38 *EPRI 2016 ES Cost Study for Utility Planning **Based on SCE 15MVA to 28MVA upgrade in 2016 link ***From Scottmadden study link

Millions 39 Substation Upgrade Deferral StorageVET Results Upgrade Deferred until 2022 Upgrade deferral benefits do not cover costs alone Need stacked value from this MUA to be beneficial Results sensitive to market conditions over 20 years Results do not consider potential benefits from: Resource Adequacy Capacity Flexible Ramping Real-time market participation 6 5 4 3 2 1 0 $1600/kW 2MW, 4MWh Net Benefit ~ $500,000 Net Tax O&M Replacement Cost Capital Cost Costs Preliminary Do Not Cite Illustrative Do not cite Frequency Regulation Net Energy Revenue Upgrade Deferral Benefits

Deferral limits 16 14 2022 Peak Power Day Energy = 3.09 MWh Power = 1.02 MW 12 10 Failure to defer not from peak load day 8 6 4 2017-04-25 0:00 2017-04-26 0:00 2017-04-27 0:00 2017-04-28 0:00 40

Deferral limits 2022 Energy-Limiting Day 16 Energy = 3.93 MWh Power = 0.911 MW 14 12 10 8 6 4 2017-06-06 0:00 2017-06-07 0:00 2017-06-08 0:00 2017-06-09 0:00 41

Millions Deferral with 4hr Energy Storage Upgrade deferred from 2017 to 2030 Higher costs due to larger ESS and more replacements over 20 years 8 7 6 5 4 $2300/kW 2MW, 8MWh Net Benefit ~ $1M Net Tax O&M Replacement Cost Illustrative Do not cite Frequency Regulation 3 2 Capital Cost Upgrade Deferral 1 42 0 Costs -1 Preliminary Do Not Cite Benefits

Substation Upgrade Deferral Conclusions In this example, storage needs stacked benefits to break even Can provide flexible ramping, RTM participation, primary frequency response, and resource adequacy capacity (all not considered) Batteries have small footprint, so can be added to alreadyowned property relatively easily Need to decide on how to prioritize land ESSs have the potential to be moved, but not often done in practice 43

Peaker Substitution Economics Example What is the net cost of resource adequacy from energy storage?

Generation: Standalone Storage 45

Resource Adequacy Services 46

Peaker Substitution Overview and Illustrative Economic Case Primary service: resource adequacy Secondary services: frequency regulation, spinning reserves, and energy time shift Alamitos Energy Storage Economic 100MW peaker substitution with grid services contracted in LA Basin Aliso Canyon gas leak caused emergency resource adequacy problem, due to peaking gas delivery constraint 6 month development vs years for CT if it were an option Tesla Battery in Southern California 47

Value What is the Net Cost of Resource Adequacy? Combustion Turbine (CT) vs Energy Storage System ESS Find the minimum RA payments required to cover all costs after receiving market benefits Net Cost of Capacity = PV RA payments = PV Costs PV Benefit Compare CT net cost of capacity to ESS net cost of capacity Benefits Energy prices are LMPs from SCE 2016/17: historical LMPs Total PV Costs Total PV Benefits Net Cost Costs Benefits Net Cost 2024: CAISO LTPP model results for RPS 33% and RPS 40% scenarios After that, energy and market revenues grow with inflation (2%/yr) Frequency Regulation and Spinning Reserve prices from CAISO southern region incremented by 2%/yr 48 * Also called Net cost of new entry (Net CONE)

Costs Battery Costs (100MW, 400MWh) $1600/kW $2700/kW Installed Cost* $250/kWh Replacement Cost 1.5% per year Fixed Operating Costs CT Costs (100MW) based on GE LMS100PA $1305/kW Installed Cost ** 0.9% per year Fixed Operating Costs $5.9/MWh Variable Operating Costs*** Historical fuel prices (not important due to low capacity factor) 49 *EPRI 2016 ES Cost Study for Utility Planning low and high end **CEC 2017 Estimated Cost of New Renewable and Fossil Generation in California ***Reciprocating Internal Combustion Engine Study: 2016 Review. EPRI, Palo Alto, CA: 2016. 3002008269.

Dispatch Requirements In StorageVET ESS and CT dispatch based on energy and ancillary services prices ES is free to co-optimize services other than RA CT can provide energy, frequency regulation, and spinning reserves when profitable to turn on (~1.5% capacity factor) 50

Millions Standalone Peaker Substitution Economics (StorageVET) Assumes 3 rd Party Developer-Owned Business Model $350.00 $300.00 $250.00 $200.00 Replacement Expenses Initial Capital Expenses Net Tax Frequency Regulation Preliminary Do Not Cite Net cost of resource adequacy comparison for high-cost ESS vs CT $150.00 $100.00 $50.00 $- Net Energy Revenue Principal Interest O&M Net Cost of Resource Adequacy Net Tax Initial Capital Expenses Principal Interest O&M ESS Cost ESS Benefit ESS Net Cost CT Net Cost CT Benefit CT Cost 51 2016/17: Historical Energy and Ancillary Services Prices 2024: CAISO s LTPP RPS 33% Model Projections EPRI 2016 ES Cost Study For Utility Planning High-End ES Prices

Millions Standalone Peaker Substitution Economics (StorageVET) Assumes 3 rd Party Developer-Owned Business Model $250.00 Illustrative Do not cite $200.00 $150.00 Replacement Expenses Initial Capital Expenses Net Tax Frequency Regulation Lower net cost of resource adequacy capacity due to low ESS costs $100.00 Principal Net Energy Revenue CT Net Cost $50.00 Interest $- O&M Net Cost of Resource Adequacy ESS Cost ESS Benefit ESS Net Cost 52

Net Cost of Capacity ($/kw-yr) Net Cost of Capacity Sensitivity to Renewable Penetration 130 110 90 Net cost of capacity Illustrative Do not cite decreases increases under when higher renewables negative prices scenario are eliminated 70 50 30 10-10 2016 Incremented Net Profit, Not Cost 33% RPS 40% RPS RPS 33% (min=0) Low ESS Cost High ESS Cost CT Net Cost RPS 40% (min=0) 53

Peaker Substitution - Conclusions In this example, the net cost of resource adequacy between storage and CT is in the same range but, Need to normalize for capacity contribution of each resource Thermal derating is well-established for fossil generators Duration derating for energy storage is an under investigation. Other considerations for battery storage Fast development timeline No gas or water connections No emissions However, unproven durability Participation in real-time market and flexible ramping 54

StorageVET User Engagement Giovanni Damato, EPRI Udi Helman, Helman Analytics 55

Becoming a StorageVET User Visit www.storagevet.com for the latest user information Send an email with subject StorageVET Account Setup Request to storagevet@epri.com and esic@epri.com Include the following in the email body: Name Title Organization Address: Street, City, State, Zip Company Email Phone xxx-xxx-xxxx Receive email response within 3-5 business days from Analytica Cloud Player auto@lumina.com with subject Invitation to Analytica Cloud Player 56

Engage with the StorageVET Community Create a StorageVET account and build your model Visit www.storagevet.com Browse through User Guides and documents for assistance Visit www.storagevet.com/documentation Engage in ESIC User Community Email esic@epri.com with your information Give feedback on your models during ESIC StorageVET Online and In-person meetings ESIC In-person Meeting November 16 th Cleveland, OH Join ESIC Subgroup Validation Efforts, led by industry partners Research collaborative 57

ESIC StorageVET Validation Giovanni Damato, EPRI Udi Helman, Helman Analytics 58

Methodology 1. Check StorageVET solutions for different applications 2. Compare model results to other commercial and research models 3. Compare model results to operational results from perspective of ISOs and project operators 4. Modify model algorithms as necessary or provide additional data to adjust results 5. Update StorageVET documentation 59

General approach Start from more simple and proceed to more complex Energy arbitrage (day-ahead) Regulation only (CAISO NGR-REM; other ISO Regulation only models) Energy + Regulation co-optimized (CAISO NGR) Energy + Regulation + Spinning Reserve co-optimized (CAISO NGR) Same as above with generic and flexible RA capacity obligations (CPUC/CAISO capacity obligations in day-ahead market) Real-time energy and ramping reserves Once the wholesale market applications have been evaluated, address distribution-connected, customer-sited, and multiple use applications 60

Why model historical market revenues? Accurate historical day-ahead and real-time market prices and market value are a baseline for future price and value projections Users can validate model results using historical prices against actual revenues of operating projects However, historical revenues are not necessarily a guide to future value due to rapidly changing system conditions 61

Energy arbitrage, SCE LAP prices, 2014-2017, perfect foresight, 83.3% efficiency System Specifications 2014 Revenue 2015 Revenue 2016 Revenue 2017 Revenue, Jan. June 1 MW, 1 hr $9,363 $8,616 $11,746 $11,354 1 MW, 2 hr $16,257 $14,972 $20,472 $19,113 1 MW, 4 hr $24,808 $21,939 $30,026 $27,151 1 MW, 6 hr $30,229 $26,072 $34,946 $32,281 62

Annual energy revenue Energy arbitrage, SCE LAP prices, 2014-2017, perfect foresight, 83.3% efficiency 40,000.00 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 2014 2015 2016 2017, Jan-Jun 5,000.00 0.00 1 MW, 1hr 1 MW, 2hr 1 MW, 4hr 1 MW, 6hr 63

Energy arbitrage, SCE IFM LAP prices, 2017, January - June, perfect foresight, 60% - 100% efficiency 64

Annual revenues ($/year) Persistence result (prior weekday/prior weekend day), energy arbitrage, SCE IFM LAP prices, 2015, 83.3% efficiency 25,000 20,000 15,000 10,000 90% of perfect foresight value captured in persistence calculation 5,000 0 1 MW 1hr 1 MW 2hr 1 MW 4hr 1 MW 6hr Fully Optimal DA Revenue Only Weekday/Weekend day persistence 65

All results are available on the ESIC collaboration site All inputs and outputs shown on prior slides are now available on ESIC collaboration site: https://collab.epri.com/esic Review and comparison to your own results are requested 66

Lunch 12:30-1:30PM

User Q&A and Advanced Training Session 1:30-3:00PM

Together Shaping the Future of Electricity 69